IOL: Property Slump Hits City Centre

Property slump hits Cape Town city centre

Some choice quotes:

The slump has hit investors who bought in the CBD during the property boom and are now being forced to sell their apartments for less than what they paid for them. Some homeowners are losing hundreds of thousands of rand.

This comes as Eurocape, owner of Mandela Rhodes Place and the Taj Hotel, readies itself to release apartments it has held back for years.

...

A Johannesburg resident, who spoke on condition of anonymity, said his studio flat in Mandela Rhodes Place had been on the market for three years.

He bought the property a few years ago for just over R1.1m, R220 000 less than what the original owner paid for it.

"The market is shocking. This property's moved from one high-profile estate agent to the next and it's still not sold," he said. "Now all I want is what I paid for it."

Remax City Bowl estate agent Henry Voss said he has had to slash the prices of a host of apartments in the CBD, with the new buyers paying "considerably less".

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Another Remax agent, Steven Delit, said many of the new developments in the CBD "didn't live up to the sizzle".

"A lot of them were set up as tourist hotels and the returns have been dreadful.

"Occupancy rates are low across the board right now, and developments like The Icon are not achieving near what buyers were told they would get," he said.

Orangerie: You Just Lost A LOT Of Money

Back in 2008 you could buy off plan a 2 bed/2 bath 120m2 duplex at The Orangerie for between R3 100 000 and R3 500 000. Today you can pick one up for R2 650 000.

That's at least a R400 000 drop in capital value not to mention the potentially hundreds of thousands of Rands in bond payments.

And the scary thing is a couple months ago a similar unit was on the market for R2 300 000!

Update: A reader just sent me a link to the latest (dated 3 Jan 2011) price list for the Orangerie

Here's how the prices compare:

Unit	Initial Price	Jan 2011 Price
AG 3	R3,31,2000	R2,850,000
AG 9	R3,445,000	R2,850,000
AG 10	R3,275,000	R2,850,000
BG 3	R3,289,000	R2,850,000
BG 4	R3,312,000	R2,850,000
BG 13	R3,346,000	R2,850,000

If you bought off plan back in 2008 I hope you negotiated your purchase price down. Waaaaay down. Also good luck selling your unit in the near future while it competes with unsold developer stock.

Dear Agents: Please Try Harder

Here's an ad for a 2 bed apartment somewhere in the City Bowl on sale for R699 000. Now the place looks pretty crap but that's besides the point. Let's look at the ad copy:

2 bedrooms, both with parquet floors and built-in-cupboards. Living room opens onto balcony with wonderful city, harbour views. Tiled kitchen, bathroom and living room. Currently tenanted until end of Dec 09. Perfect for 2010 rentals!

Notice that last two sentences that I highlighted? This place has been on Gumtree for at least a year but the ad has not changed. Is the flat still tenanted? Who knows! Who cares! That attention to detail on the agents part plus the fantastic photos in the ad just compels me to make an offer!

Mutual Heights: You Just Lost A Lot Of Money

In Feb 2008, the asking price for a 1 bed loft apartment in Mutual Heights was R825 000.

In Feb 2010, the asking price for a 1 bed loft apartment in Mutual Heights is R750 000.

Rent Vs Buy: City Bowl

Here's a 2 bed victorian cottage in the City Bowl on sale for R1 350 000 which will attain a rent from R6 600 from June, so I estimate it gets about R6 000 now. With a full bond the difference between the rent and the bond payment is a touch under double the rental alone. Here's the income and yield graph:

All in all pretty bad. Sub 6% return on investment with 62% downpayment required to break even on cash flow. With a 50% downpayment you still need 2% capital appreciation to not lose any money at all.

Rent Vs Buy: City Bowl - An Albatross For Years To Come

Here's a 2 bedroomed apartment in the City Bowl on the market for R1 195 000 with a rental of R5200 a month and tenanted till December 2008. Described as a "Good investment for years to come." The difference between the rent and the bond payment is just under twice the rental. Here's the yield and payment graph.
Sub 6% returns if you buy it for cash witha 66% downpayment required to break even on cash flow and 2.46% capital appreciation required even if you put down a 50% deposit and of course these numbers will be lower once rates, maintenance and vacancy costs are taken into account. But hey you've got a tenant locked in till December! The sucker!